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Fund research

Threadneedle UK Equity Income – Targeting dividend growth

We take a look at how the experienced Richard Colwell has invested the fund and how it’s performed.

Important information - This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 5 years old

It was correct at the time of publishing. Our views and any references to tax, investment, and pension rules may have changed since then.

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.
  • Richard Colwell is an experienced income investor in the UK stock market
  • The fund has performed well over the long term and features on our Wealth 50 list of favourite funds
  • The manager looks to invest in highly cash generative businesses

Our view

Threadneedle UK Equity Income has been managed by Richard Colwell since 2010 and he’s not afraid to invest in unloved and overlooked companies, building a strong long term track record along the way. The manager looks to invest in companies with high returns and strong cash generation, believing that it’s this that enables them to fund their own growth. He combines investing in these cash generative companies that pay out a relatively high level of income to shareholders with investing in some businesses undergoing a recovery. The companies might pay a lower income for now, but he believes they have the potential to grow both the income they pay and the value of the business in the future.

The manager also considers what’s going on in the wider economy and how this could affect company performance. We like his sensible approach to investing and think the fund will perform well over the long run, although there aren’t any guarantees this will be the case. Colwell invests in a relatively small number of businesses, including smaller companies, and both of these factors add risk.

The fund has performed well over the long term and features on our Wealth 50 list of favourite funds. We think it’s a great choice for an investment in the UK stock market, and for portfolios focused on income.

How’s the fund invested?

The manager is currently positive on the Industrials and Consumer Services sectors and together they account for 48.4% of the fund’s total investments. Companies in the Industrials sector are typically involved in making or selling machinery, equipment or supplies used in manufacturing and construction. Electrocomponents and Rentokil Initial, for example, both feature in the fund’s top five holdings.

Colwell believes that Rentokil is well positioned for future growth, given its stable management team and the strong competitive advantage it possesses over its rivals. And there’s still plenty to aim for, with the company’s end market growing at around 6% per year, the size of the pie is increasing.

Other large investments include Phoenix Group, RSA insurance and Wm Morrison supermarkets. But the fund’s largest position, at a sizeable 9.3%, is the Pharmaceutical company AstraZeneca. Colwell thinks that the company has made progress on its development of new, higher margin products and expects it to be able to generate higher cash flow and dividend growth over the coming years.

How’s the fund performed?

The fund has performed strongly over the long term, delivering greater returns than the FTSE All-Share index. Our analysis suggests that the fund’s investments in the Industrials and Health Care sectors have been the biggest contributors to the fund’s performance over the long term.

But over the last five years, the fund has matched the return of the broader UK stock market, delivering a return of 43.8%* to investors, the same return an investment in the FTSE All-Share index would’ve provided. Please remember past performance isn’t a guide to the future.

The fund’s charges may be taken from capital. This could boost the yield but reduce long-term growth potential.

Annual percentage growth
Dec 14 -
Dec 15
Dec 15 -
Dec 16
Dec 16 -
Dec 17
Dec 17 -
Dec 18
Dec 18 -
Dec 19
Threadneedle UK Equity Income 4.5% 13.8% 7.4% -6.4% 20.4%
FTSE All-Share 1.0% 16.8% 13.1% -9.5% 19.2%

Past performance is not a guide to the future. Source: *Lipper IM to 31/12/2019

Find out more about this Fund including charges

Key Investor Information


Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.

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Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.
Written by
Joseph Hill
Joseph Hill
Senior Investment Analyst

Joseph is part of our Fund Research team. Having joined HL in 2017 initially on a graduate scheme, he's now integral to our analysts who select funds for our Wealth Shortlist. He also analyses the UK Growth, UK Equity Income and UK Smaller Companies fund sectors, providing expert insight for our clients.

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Article history
Published: 22nd January 2020